Do you need a business plan? Or just a manifesto and goals sheet? Or something in between?
Business plans are obsolete almost as soon as you write them. And having written quite a few for prior businesses, I can tell you they take up a lot of time. I can also tell you that I almost never looked at them after hitting Save. Investors like to see them. So if you’re planning to raise outside capital, you probably need one.
Barring that, their value might seem questionable. The upside is they force you to think through the entire business, which helps uncover any problems ahead of time and get you working on solutions or alternatives. But you don’t need a complete business plan. Here are five mini-plans I recommend instead:
1. REVENUE GENERATION PLAN
This is where you figure out how much it costs to make your product or provide your service, how much it costs to market it, what your operating costs are, and any other expenses. This should include everything you can think of, and then you should pad those numbers by 10-15% to be safe. Because everything ends up being more expensive than you think, surprises happen, and inflation.
Why are expenses in your Revenue Generation Plan? Because unless you know the true total cost to make your product and run your business, you don’t know how much you need to charge. Taking all of that into account, whatever your Total Cost Per Unit is, you should be able to sell it for at least twice that. If those numbers don’t work, your business probably won’t work. More money gives you more capital to grow. Also, higher profitability makes it easier to sell your company if that’s your goal.
It’s good to look long term, so make projections through at least a year or two. If you know there are major expenses at specific growth points, figure out how much you’ll need to make and save to cover those. Beyond that, honestly, you’re just guessing. More importantly, look at how you’ll make money in the short term…that’s what keeps you going to accomplish the long term.
Example: My friend Drew launched The Loam Wolf to build a story-and-lifestyle-based mountain bike website, with revenue primarily coming from advertising. But it takes years to build the traffic needed to support him (let alone additional writers) off advertising. Fortunately, his branding is cool enough that he’s able to sell T-shirts and stickers to generate enough income to keep the servers running while he builds the business.
Decide how much revenue you’ll reinvest in the short term stuff to keep the lights on (which should include paying yourself and your team), and how much you’ll set aside to fuel R&D to reach the long term goals.
2. WHO’S DOING WHAT PLAN
If you’re a solo-preneur, should you skip this? After all, you’re doing everything, right? Not so fast. You’ll want to think about what you can delegate and which support activities it makes more sense to outsource. Then you can focus on the core activities that drive your business forward.
If you’re launching with a team, who’s doing what? If everyone’s responsibilities are clearly laid out in advance, there will be no squabbling about unfairness or things left undone because “that’s not my job”. Not only does this let you relax and focus specifically on your part of the business, it instills responsibility in your partners and makes everyone accountable. This also helps you determine what share of the total workload each person is responsible for, which helps you write the…
3. OWNERSHIP PLAN
If more than one person is launching the company, you need to determine ownership percentages before you start making money. Once cash is rolling in, shit gets real and people get more aggressive and defensive. You absolutely need to have this worked out, in writing, and agreed upon prior to launching. This should include conditions for changing, rescinding, buying or selling ownership from any founder should they leave or aren’t performing their duties as described in the Who’s Doing What Plan. Discuss “what ifs” and have contingency plans in place.
4. TOP LEVEL MARKETING PLAN
This plan assumes you know what you’re selling and why, that you have something worth selling, and that you know who your customer is. Those outline what you’re selling, why you’re selling it and who will buy it. This plan is where you outline how you’ll reach them. The marketing plan can simply be a checklist like this:
- post to Facebook daily
- find and contact one influencer daily
- answer customer emails daily
- run banner campaigns on Google Adwords, review results every Wednesday
- schedule street teams for sampling
- attend trade shows or consumer expos, put each on calendar
Include your budget for each item, then make sure those numbers go into the expense list in your Revenue Generation Plan. It’s also good to have an “Other” category and set aside funds for that so if an opportunity arises, you can jump on it, or expand any other item that’s working well. Some items (like building a website or eCommerce site, expo booth fees) will be one-time or annual expenses. Others (banner ads, hosting, travel) will be ongoing. List and budget for both types.
You should think through how you’ll track those efforts, too, so if they’re not working you’ll know when you need to explore other methods. I don’t think you need to develop all of your contingency plans (if Facebook no good, switch to Twitter), but there should be some thought put into what you hope to gain from each effort. Be sure to include the costs of campaign development (graphics, video, talent, etc.), not just the activation costs.
5. PRODUCTION PLAN
What’s the production process? How do you make what you sell? What do you need to perform your service? How long is the production cycle? Who are the vendors? Where does stuff ship to and from? Who’s in charge of that? Who are the contacts at your production facilities? How will you keep track of the process and inventory? How will you track your time spent on providing your service? How much time should you set aside for managing your company (i.e. working on it) versus actively working in it?
Basically, this should be a step by step plan on how to make your widget or perform your service. Be as detailed as possible, such that you could hand someone else this list and they could mostly carry it out. Why? Because this level of detail forces you to think through every aspect, which often reveals holes in your plan, hidden costs and other things that you don’t want to be surprised by down the road. It also helps ensure things will continue should something happen to you…and that you can eventually delegate this.
Having these specific plans gives you useable action items, checklists and to-dos. They function to highlight all of your expenses and needs so you can think through how you’ll pay for them and who will do them. It forces you to list everything you’ll need to do to launch and run your company in the short term. Things change fast, but the constant is that you need a solid framework up on which to build your business. These five plans give you just that. And quite honestly, they’re kinda fun to do!